Win, Lose and Draw

If I had to briefly describe the markets' performance in 2011, I would have to call it a tie -- not a win or a loss, but a very unsatisfying tie. In the first half of the year, it appeared as though the markets would lead the shaky economy higher. But then a bout of volatility over the summer, a U.S. debt downgrade, and a European debt implosion made every trading day seem like a new adventure, reminiscent of the fourth quarter of 2008. Thankfully, volatility this year never reached 2008 levels.

Short of any wild activity today, the last trading day of the year, the S&P 500 will end the year basically flat. The smaller names have had a more difficult time, with the Russell Microcap Index down 9% on the year. Small value as measured by the Russell Microcap Value Index is down 10%. There's isn't a lot a lot of excitement, and it's slim pickings in value land.

My JIMS CRAB FEST portfolio for cheapskates is down about 8% year to date -- slightly better than the Russell Microcap Value Index, but nothing to write home about. While I didn't expect instant gratification (such an index should run its course for at least two years), the first year was still disappointing.

The portfolio's big winner for the year, and a bit of a surprise given the consumer-discretionary nature of its products, is Arctic Cat (ACAT), which is up 58%. Watchmaker Movado (MOV) had a decent year, adding 15%, as did Tech Data (TECD), which moved 14% higher.

The big losers are Imation (IMN), off by 46%, which now trades for less than cash on the books. Tuesday Morning (TUES) declined 39%, and the ever-frustrating Skechers (SKX) dropped 40%. Of the three, Skechers (which is trading for less than 1.3x net current asset value and is near its 52-week low) may be the best bet for a bounce in 2012. The company is sitting on nearly $250 million in cash, or $5 per share, and has been reducing inventory of its disappointing Shape-Ups line. Some may have already declared this stock a value trap, but I'm not there yet.

Given the composition of the 15 companies in the JIMS CRAB FEST portfolio, I would have expected some merger or buyout activity. So far, only one, Force Protection, has been acquired. Unfortunately, the takeout price was close to Force's price at the inception of the index. That deal, in which General Dynamics (GD) paid $5.52 per share, sums up the year pretty well: It's a tie.

I'll keep JIMS CRAB FEST alive in the coming year, but I'm searching for a replacement for Force Protection. In keeping with the original index design, the replacement will trade at less than 2x net current assets, have ample cash, little or no debt, and a market cap between $200 million and $3 billion. Suggestions are welcome.

To subscribers, fellow contributors and The Street's editorial staff, I wish you all a happy, healthy and prosperous New Year.

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